Importance of insurance position
The role of Contractual Insurer is often overlooked when bringing or defending a vehicle related claim as the majority of claims fall for consideration as RTA Insurer.
There are circumstances when it is important to assess whether an insurer has standing as Contractual Insurer; particularly if the incident happens off the highway or space where the public has access and Road Traffic Act status does not apply.
In subrogated claims this can present a barrier to recovery as Article 79 status and the MIB cannot entertain subrogated losses because the Claimant has already received the benefit of insurance and the Fund exists for people without a remedy available to them.
Vehicle repairs resulting in fire damage
In R&S Pilling (t/a Phoenix Engineering) v UK Insurance Ltd  EWCA Civ 259 a vehicle narrowly failed its MOT test and was subject to welding repairs by the policyholder in his employer’s workshop garage (with permission) as part of a repair to prepare the vehicle for roadworthiness for another MOT.
During the course of welding works a fire ignited and caused substantial damage valued at £2 million. In short, the cause was due to welding sparks igniting nearby combustibles. Axa paid for the reinstatement for Phoenix Engineering and sought the recover these as subrogated losses.
At the time of the fire the vehicle was in a contained workshop, stationary and not in transit. The Court was asked to look at whether the welding repairs constituted “use” of a vehicle.
The claim failed at first instance largely on the basis the welding repairs were not considered to be “use” of the vehicle. This decision was appealed.
The policy booklet for the vehicle’s insurance stated:
“1a Cover for you
We will cover you for your legal responsibility if you have an accident in your vehicle and:
you kill or injure someone;
you damage their property; or
you damage their vehicle.”
This policy did not have geographical restrictions and indemnified for losses up to £20 million. The policy extended beyond the minimum RTA requirements for cover “on a road or other public place” and cover up to the value of £1.2 million.
The Court of Appeal held that on the issue of policy wording the cover provided by the policy was to be read as extending to all the matters in S145(3) Road Traffic Act 1988.
The policyholder had complied with his policy conditions and the Court looked at the Contractual Insurer position in respect of what cover was provided under the motor insurance policy and cross referenced this with section 145(3) Road Traffic Act 1988, Directive 2009/103/EC of the European Parliament and of the Council of 16 September 2009 and past authorities such as Dunthorne v Bentley  Lloyd’s Rep IR 560 and Vnuk v Zavarovalnica Triglav D.D  RTR 188.
Repairs as part of the “normal function” of a vehicle
It was held by the Court that carrying out repairs to enable the car to be in a safe condition and pass its MOT so the policyholder could continue to use it was consistent with the normal function of a car.
The wording of the EU Directive emphasised vehicle “use” instead of different terms such as “operate” or “drive”. Prior to the fire the vehicle had been driven to the workshop, carefully reversed into the bay and then works were carried out to make it roadworthy to pass a MOT test (that it had only failed the previous day).
The Court allowed the claim as it found the welding works that caused or contributed towards the fire was vehicle “use” because it was consistent with the normal function of the vehicle under Section 145(3)(a) Road Traffic Act 1988.
At paragraph 77 of the judgment the Court expressly allowed an extended view of repairs to be taken when Lord Henderson stated:
“The only observations which I wish to add concern the Commonwealth authorities to which we were referred. Speaking for myself, I have found them of some assistance, because in both Canada and Australia the courts have shown themselves increasingly willing to interpret the concept of “use”, in the context of statutory provisions or policy clauses relating to third party car insurance, broadly enough to encompass the carrying out of (at least) ordinary repairs needed to keep a vehicle in a roadworthy condition.
Main points arising from this decision
- “Use” is not restricted to driving a vehicle.
- A vehicle can be in “use” when parked and stationary.
- “Use” involves anything consistent with the normal function of the vehicle.
- Damage “arising out of the use” of a vehicle is not restricted to impact damage and can be consequential.